Goldman Sachs CEO shares warning about AI's stock market 'drawdown' effect

Goldman Sachs CEO David Solomon on Friday warned that an AI investment frenzy may be overdone – and that stock markets are due for a “drawdown”.Major US stock indexes have notched record high after record high this year on the promise of artificial intelligence, but there’s a good chance that not all of those investments will deliver big returns, Solomon said during Italian Tech Week in Turin, Italy, on Friday.He noted that the internet craze of the late 1990s and early 2000s drew a frenzy of investment in tech companies.But it was followed by a dramatic collapse in the shares of many of those firms – known as the “dot-com bubble”.“You’re going to see a similar phenomenon here,” Solomon said.

“I wouldn’t be surprised if in the next 12 to 24 months, we see a drawdown with respect to equity markets.”“I think that there will be a lot of capital that’s deployed that will turn out to not deliver returns, and when that happens, people won’t feel good.”President Trump earlier this year unveiled a collaboration between top tech firms like SoftBank, OpenAI and Oracle that intends to invest $500 billion over the next four years into building new AI infrastructure across the country.AI optimism has helped push Wall Street indexes higher and higher, even after fears around Trump’s tariffs tanked stocks earlier this year.That’s led some leaders in the financial and tech industries to warn of a potential “bubble burst” down the line.“I’m not going to use the word bubble, because I don’t know, I don’t know what the path will be, but I do know people are out on the risk curve because they’re excited,” Solomon said.“And when [investors are] excited, they tend to think about the good things that can go right, and they diminish the things you should be skeptical about that can go wrong.”Investors have poured capital into stocks like Microsoft, Alphabet, Palantir and Nvidia, as tech firms announce multi-billion dollar investmen...